2. Background
PG&E proposes to sell all of its distribution facilities and a few related transmission facilities located in the Westside Zone to TID, to enter into a new service area agreement with TID that would authorize TID to provide electric distribution service to customers in the Westside Zone and the Don Pedro South Shore Zone, to lease property at PG&E's Salado and Patterson substations to TID, and to enter into other related transactions. The Westside Zone consists of approximately 225 square miles in the general geographic area of Patterson and Crows Landing in Stanislaus County. PG&E presently serves approximately 5,450 accounts in the Westside Zone.
TID is an irrigation district organized under California law that owns and operates an electric distribution and transmission system and provides electric service to customers in portions of Merced, Stanislaus, and Tuolumne Counties. TID has been in the retail electricity business since l923 and currently serves over 67,000 accounts, which range from residential to large industrial users.4
The Commission has previously approved service area agreements for PG&E and TID in 1941 and 1953. In recent years, disputes arose between PG&E
and TID regarding the continuing validity of the 1953 service area agreement.5 TID contended that the 1953 agreement had expired and could not be enforced. PG&E contended that TID had violated the 1953 agreement by offering electric distribution service within PG&E's service area in Stanislaus County, including the cities of Gustine, Los Banos, Patterson, and Newman. PG&E also claimed that the formation of WPA by TID and PID violated the l953 agreement and that WPA was formed for the purpose of providing electric service to customers in PG&E's service area.
In August 1999, PG&E filed Application (A.) 99-08-0l8, which asked the Commission to clarify the continued validity of the 1953 service area agreement. In D.00-06-002, we denied the application on the grounds that PG&E sought an advisory opinion and that Assembly Bill (AB) 2638, which was then pending before the Legislature, might give the parties guidance on this issue.6
During legislative discussions of AB 2638, Assembly Members Cardoza and Calderon, co-authors of the legislation, urged affected parties, including TID and PG&E, to attempt to resolve pending disputes.7 The transactions proposed in this application result from a compromise by PG&E and TID to resolve issues related to their respective service areas.8
4 Under the Irrigation District Law (Water Code Section 20500 et seq.), an irrigation district (district) may purchase or lease electric power from any public or private entity and may acquire, operate, lease and control plants for the generation, transmission, distribution, sale and lease of electric power. (Water Code Sections 22115, 22120.) Districts may sell power to municipalities, public utility districts, or persons either within or outside of district boundaries. Id. However, the power of a district to provide electric service in territory served by an electric corporation or in contiguous territory may be limited by a service area agreement, approved by the Commission, (Pub. Util. Code §§ 8101 et seq.); the requirement for Commission approval before a district that served retail electricity customers as of January 1, 1999 may construct, lease, acquire or operate facilities to serve retail customers of an electric corporation (Pub. Util. Code § 9607); and the requirement for reciprocity agreements between districts and electric corporations before they may serve each others' customers (Pub. Util. Code § 9601(c).) 5 See PG&E Testimony at pages 1-6 to 1-8. 6 AB 2638 (Stats. 2000, Ch. 1042) became effective on January 1, 2001. 7 PG&E Testimony at page 1-8. 8 Id.
